Sales tax arrears in winding up need to be due and payable within the statutory look-back period.

Sales tax arrears did not rank in priority in winding up unless they were both due and payable within the twelve months preceding the relevant date under section 530(1)(a) of the Companies Act, 1956; arrears from earlier years therefore failed the priority test. Assessment orders made for a later year without notice to the Official Liquidator could not be ignored on that basis alone, because the taxing statute provided the exclusive remedies for challenge through appeal, revision and reference. The Official Liquidator remained bound by the assessments until they were set aside under that statutory scheme, so the later claims were to be considered, but without winding-up priority.

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Issues: (i) Whether sales tax arrears were entitled to priority in winding up under section 530(1)(a) of the Companies Act, 1956. (ii) Whether assessment orders for the later assessment year, made without notice to the Official Liquidator, could be rejected by him without first being set aside under the Sales Tax Act.

Issue (i): Whether sales tax arrears were entitled to priority in winding up under section 530(1)(a) of the Companies Act, 1956.

Analysis: Priority under section 530(1)(a) is confined to revenues, taxes, cesses and rates that were both due and payable within the twelve months immediately preceding the relevant date. Arrears relating to earlier assessment years did not become due and payable within that period. The fact that the tax was recoverable as arrears of land revenue did not convert it into revenue due and payable within the meaning of the winding-up provision, because recoverability as land revenue is distinct from the statutory requirement of being due and payable as revenue within the relevant period.

Conclusion: The claim to priority failed and was against the Revenue.

Issue (ii): Whether assessment orders for the later assessment year, made without notice to the Official Liquidator, could be rejected by him without first being set aside under the Sales Tax Act.

Analysis: The Sales Tax Act provided a complete mechanism for challenging assessments by appeal, revision and reference, including provision for condonation of delay. An assessment order could not be questioned in any other manner except as provided by that Act. Therefore, once the Official Liquidator had notice of the assessments and had not taken steps to have them reversed or modified under the statutory scheme, he was not justified in treating them as non-binding merely because they were made ex parte or without notice to him. The liquidator could still pursue the statutory remedies, but until then the assessments stood.

Conclusion: The rejection of the later assessment claims on that ground was erroneous, and the claim was to be entertained, though without priority.

Final Conclusion: The appeal succeeded only to the limited extent of restoring the later assessment claims for consideration in accordance with law, while the demand for priority in winding up was rejected.

Ratio Decidendi: For priority in winding up, a tax must have become both due and payable within the statutory look-back period, and an assessment order remains binding unless set aside through the special remedy provided by the taxing statute.

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